Tuesday, February 14, 2012

Prolonging the agony

The Guardian seems to be picking up something not immediately evident from Ollie Rehn's statement yesterday. In elliptical fashion, the commissioner for economic and monetary affairs notes only that the vote in the Greek Parliament "is a crucial step forward towards the adoption of the second programme".

He goes on to say that he was confident that "the other conditions including for instance the identification of the concrete measures of €325 million will be completed by the next meeting of the Eurogroup", which would "then decide on the adoption of the programme".

Eurozone finance ministers are expected to meet in Brussels on Wednesday and had been preparing to endorse the rescue programme for Greece, but The Guardian is suggesting that this will not be the final step. The best that Greece can now hope for is an agreement "in principle". A definitive decision would be left to an EU "summit" on 1 March.

On top of that, the German parliament still has to approve the deal, and is not planning to debate it until 27 February.

However, The Guardian is not alone in its analysis. Similar intelligence is coming from the Wall Street Journal, which reported an early surge for the euro on the currency markets, with the single currency then steadily losing steam in New York trading as it became clear that Greece had "more hurdles to jump before receiving its bailout".

All of this points to a continuing reluctance to go through with the second bailout, as discussed here and here in our earlier pieces. The "colleagues" and/or Germany are going through the motions of supporting Greece, but the drive has gone out of the programme.

Not least influencing opinion must be the decision of Greece to hold a general election in April, only shortly after the 20 March deadline when €14.4 billion in bonds come payable. No one can be certain that even if Papademos gives the assurance that the bailout conditions will be met, the incoming government will hold to them.

Thus, more and more, it looks as if Greece is being pushed towards the exit. Some are even suggesting that this has always been the intention, arguing that the bailout was offered as a token gesture in the expectation that the Greek economy would collapse before it was taken up.

Nevertheless, with no one willing to admit responsibility, it is difficult to determine who precisely is wielding the assassin's knife. My guess is that this remains a German initiative, perhaps explaining why Soros has taken against the chancellor, complaining that she is "leading Europe in the wrong direction".

On the other hand, the commission needs to keep the eurozone together, but is also having to nod to the realities, and acknowledge German power. It is not yet appropriate to cast Ollie Rehn in the role of a reluctant Brutus, although stranger things have happened.

Mixing metaphors outrageously, once senses here an element of tightrope walking, but that has more than enough perils without also having too many people trying to balance on the slender thread, each attempting to take different directions and speed. A gust of wind could bring them all down, and there isn't any obvious safety net.

At risk is the entire European "project" and the next part of the script hasn't yet been written.